I always hear people say, "I'm grateful I was hired before 2008 when they made changes to the pension." What does that mean?
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@4ino+1fTH1WZT: Good explanation. It was mostly a shift from a pension based focused system to a lump sum focus, but others are also correct that at current interest rates the pre-2008 calculation was a much better deal.
If you work along side someone at the same PSG but they were hired before 2008, their total compensation is a lot more than yours. If you complain enough this can be corrected.
The way I think of it is pre 2008 you were guaranteed an annual income. You could convert the annual income to a lump sum at a market interest rate.
Post 2008, you were guaranteed a lump sum. You could convert that to an annuity at a market interest rate.
The rub is that for the pre 2008 and post 2008 numbers to match you would need those interest rates to be ~10% and in the past 14 years they have been more like 2-4%.
We are moving to a higher interest rate world so expect the gap to narrow. Unfortunately that means the pre 2008 folks will get less, not the post 2008 folks will get more on their lump sum.
What was the cutoff? Hired in Jan 2008
EOI'd in 2020 with a nice (pre-2008) pension. As others have stated, the changes basically cut a post-2008 employee's lump sum calculation (what 98% of retirees take) in half. Obviously the longer you work for Chevron the bigger the $$$ hit you take. Those who started in 2008 right out of college are around 40 now, so the real impact of this change won't hit The Layoff board for another 15-20 years.
In simple terms, the pension formulas for the pre and post 2008 hires are different, and the pre 2008 formula is more generous. The 2008 financial crisis was kind to no one, and companies made the necessary changes to survive and meet their pension obligations under the PBGC. You can’t pay out what you don’t have.
20 year employee retiring might get $450k lump sum payout after 2008 but over $1 million before.
If you work 25-30 years it could be an additional 0 on the end. But most cases it’s more like 2x
*After June 2008
A factor of 2
Its less generous after 2008z